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McConnell Keeps Heat on EPA Over Regulatory Abuses
Fixing our unsustainable spending trajectory is priority one, two, and three for conservatives in Congress. And for good reason. Like the tornadoes that have plagued much of the Great Plains recently, a debt crisis threatens to hit hard and fast; but has at least granted us enough forewarning to seek shelter.
But while the debt winds continue to whip into a frenzy, we can’t ignore another potential economic disaster – the Environmental Protection Agency’s (EPA’s) regulatory overreach. It may lack the rhetorical punch of the debt limit debate, but Senate Minority Leader Mitch McConnell (R-KY) is working hard to ensure that the EPA’s backdoor energy tax and costly green energy agenda doesn’t fall out of the spotlight.
Last summer, Senate Democrats attempted to pass a massive new energy tax under the guise of a “market-based” method of curbing greenhouse gas emission. Fortunately, legislators saw the so-called "cap-and-trade" scheme for what it was - a massive tax hike - and the bill died in the Senate.
Despite the bill’s failure, President Obama warned, “Cap-and-trade was just one way of skinning the cat; it was not the only way.” His ominous foreshadowing has proved to be true. The EPA has taken up where Senate Democrats left off, substituting their self-proclaimed prerogative to regulate greenhouse gases for the will of Congress, and the citizens who elected them.
In his speech on Wednesday to the Kentucky Coal Association, Leader McConnell described the impact the EPA’s plan would have,
“Their national energy tax would hit you every time you start your car or turn on the light bulb. It would endanger millions of jobs across the country and hurt an already fragile economy. And it directly targets Kentucky’s coal industry, by making coal-fired power more expensive.”
McConnell and others have attempted to pass legislation that would prevent the EPA from going around the legislative process. Many Democrats have also realized that Congress, not administrative bodies should be the ones taking action. In voting for a bill to temporarily block the EPA from regulating greenhouse gases, Jim Webb (D-VA) has said, “I do not believe that Congress should cede its authority over an issue as important as climate change to unelected officials of the Executive Branch.”
The rebuke hasn’t stopped the EPA from overstepping its bounds. In his speech, McConnell described a similar situation happening with coal,
“The EPA retroactively “reinterpreted” its regulations and withdrew a Section 404 permit previously issued by the Army Corps of Engineers to a mine in southern West Virginia, shutting it down and throwing 90 miners out of work. Every mine in Kentucky is similarly threatened.
“The EPA declared even more permit applications to be under enhanced review, in effect playing a “run out the clock” game and putting many Kentucky mining operations in limbo, along with the economic activity mining could create.
By changing the rules in the middle of the game, any sense of regulatory certainty has been thrown out the window, and all without a single vote or hearing in Congress. In response, McConnell has proposed legislation that would set a 30 day timeline for the EPA to rule on a permit received from a mine. The EPA’s authority to reject the permit based on health and environmental concerns would be left intact, but the veil of regulatory uncertainty would finally be lifted.
Time and again, job creators and business owners have been begging Washington to remove the uncertainty that is preventing them from investing and hiring. While the debt limit negotiations are hogging the spotlight, it is good to see a high profile Senator like Mitch McConnell making sure that no stone is left unturned in the search for ways to boost job growth. And one of those ways is reigning in an out of control EPA.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Victory! Late last night the Senate held a vote on legislation that would have implemented President Obama’s desired tax increase on America’s energy companies. Thanks to the efforts of many, including concerned taxpayers and NTU members, the vote did not succeed - by a margin of 52-48 the U.S. Senate put an end to the proposed tax hikes.
NTU Executive Vice President Pete Sepp, and Vice President of Government Affairs Andrew Moylan, took to the media to counter pro-tax misinformation that claimed the debate was about ‘oil subsidies’. Even Media Matters came to the aid of the President, attacking NTU’s efforts, but were swiftly countered.
An apparent response to rapidly rising gas prices, the tax package would clearly have done nothing to alleviate that situation, likely making things worse.
The only real solution to the issue of rising gas prices, increased supply, suffered a setback as well. A Republican plan to reduce bureaucratic hurdles for new drilling permits was defeated in the Senate.
While economically damaging tax hikes were avoided, an all-of-the-above energy policy, and corporate tax reform, that would truly solve America’s government imposed energy crisis are a ways from reality.
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With gas prices officially besting $4 per gallon this week, partisan politics are reaching a feverish pitch in Washington DC. Posturing and finger pointing amongst politicians bent on pursuing any measure that might divert the wrath of angry constituents has led to legislation which would eliminate so-called “subsidies” for “Big Oil.” Far from the answer to higher pump prices, these damaging tax increases will ultimately hurt energy consumers and could threaten the national economy and energy security.
What would be the effect of politically driven new energy taxes? Just look at what the experts are saying:
“[One of President Obama’s targets] is the foreign tax credit, available not just to manufacturers, but to every American company doing business overseas. The government gives a credit for taxes paid to foreign governments. Some politicians think we should take this away from energy companies, raising $800 million in taxes; some think we should take it away from every company — effectively taxing them twice. But it strains credibility to call it a ‘special’ break for oil companies.”
(Former U.S. Senator John E. Sununu, The Boston Globe, 5/09/2011)
“The U.S. is the only country that taxes foreign revenues in the first place, so the dual capacity credit allows U.S. companies to compete fairly against foreign competitors. Doing away with it would dramatically disadvantage American firms relative to their foreign rivals.”
(LSU Endowed Chair of Banking Joseph Mason, The Wall Street Journal, 7/30/2010)
“Taxation systems don’t exist in a vacuum in an increasingly-competitive world. The unintended consequences of proposed changes would likely accelerate the shrinking position of U.S. companies internationally, which would be bad both for the U.S. economy and for energy security.”
(IHS CERA Chairman Daniel Yergin, CERA’s “Fiscal Fitness: How Taxes At Home Help Determine Competitiveness Abroad” Report, 9/2010)
“My estimates suggest that repealing both Section 199 and dual capacity credit would produce extensive economic losses to the U.S. economy for the next decade, including $341 billion in decreased economic output, almost $68 billion in wage cuts, and initial losses of over 154,000 jobs in 2011.”
(LSU Endowed Chair of Banking Joseph Mason, “Regional and National Economic Impact of Repealing the Section 199 Tax Deduction and Dual-capacity Tax Credit for Oil and Gas Producers,” 9/13/2010)
“In addition when we move to the safe harbor definition, on both rate of return and on the value that a company can bid, the United States finds itself at the bottom of the competitive pile … If you reduce the activities of U.S. companies internationally, then there must be long term reduction in the income that can be repatriated. Interestingly, when we think in terms of political support, it is often the oil and gas industry or the resources industry generally that is a leader in terms of entry into new countries and in terms of reestablishing diplomatic ties. The resources industry tends to be in the vanguard.”
(IHS CERA Chief Energy Strategist David Hobbs, Brookings Event, 9/27/2010)0 Comments | Post a Comment | Sign up for NTU Action Alerts
Media Matters Misses Mark in Criticizing NTU Anti-Energy Tax Campaign
Media Matters recently examined the National Taxpayers Union’s (NTU’s) efforts to oppose tax increases on energy companies (and by extension consumers), contending that “oil subsidies” could be ended so that more money can be spent on alternative energy sources.
The various points Media Matters conglomerates do not paint a clear picture of the tax situation America’s energy companies face. Instead Media Matters focuses on attacking profits, repeating analyses of oil production based on short periods of time, and mischaracterizing the nature tax deductions, all while ignoring the myriad implications of such an unabashed tax assault on a particular sector of the economy.
Right off the bat in Media Matters’ article on what it calls “NTU’s misinformation”, Media Matters is itself repeating misinformation. The very first, and primary, claim is that measures like the Section 199 tax deduction are “taxpayer giveaways”.
The commentary then applies a different standard to the President’s push for spending any new revenue from an increased tax burden on energy companies on “alternative energy.” Somehow, this is no longer a “taxpayer giveaway” but is now an “investment”.
Aside from the fact that the President is transparently trying to put the one part of the energy industry at a disadvantage to reward politically favored friends in the “green” sector, the various tax provisions to which Media Matters refers are clearly not subsidies.
Oddly enough, Media Matters even cites a source (apparently to bolster their argument) who clarifies that we are not talking about subsidies: “…John Kingston, Director of News at energy information firm Platts said: ‘…I don't view them as subsidies.’” Clearly, we are not talking about subsidies, we are talking about deductions.
If a self-employed person takes a business trip and deducts airfare from his income tax return, the government never pays him a cent; the same applies here. Energy companies are simply permitted to take deductions for a variety of necessary business activities, along with a policy called “dual capacity” to help offset taxes paid to foreign governments. The United States is the only major industrialized country in the world that “double taxes” the foreign income of American businesses and individuals. NTU would certainly prefer a tax code that is far more simple, a code that would not “double tax” Americans, but that is not the situation we have today. Because international competitors do not face such a disadvantage, provisions like dual capacity are in place to keep America’s companies competitive in the global race for resources.
This is the larger reality Media Matters fails to explain. American firms face intense international competition from state-owned oil companies out of China, Venezuela, and the Middle East. Even with the deductions in question, they face an effective tax rate of around 34-41 percent, and have a relatively low profit margin of 5.7 cents on the dollar.
Not only would ending these tax deductions raise prices at the pump, it could put American jobs in jeopardy, (And yes, Brazil is expanding oil drilling; officials there are not just talking about ethanol.)
These dire consequences do not seem like a worthwhile tradeoff for a vindictive tax increase on an industry the left vilifies. After all, GE (home of recent Obama Economic Advisory Committee head Jeffrey Immelt) recently received press for paying an effective tax rate far below the U.S. corporate average and President Obama never batted an eye. Of course, even this story has its wrinkles, as our recent study on tax system complexity noted.
Speaking of complexity, it’s one thing to advocate repeal of provisions like Section 199 and dual capacity across the board, in exchange for reductions in corporate tax rates that even the Administration acknowledges to be high. It is also quite legitimate to examine programs for all forms of energy that actually do represent commitments of tax dollars. NTU has criticized federal initiatives such as nuclear energy loan guarantees or the ultra deepwater natural gas and petroleum research program in the past.
Now that we have painted a broader picture of the challenges American energy companies face, and discussed the claim of “taxpayer giveaways”, we can examine Media Matters’ additional arguments point by point.
Media Matters: Energy Experts Say Getting Rid of Oil Subsidies Won’t Cause Jump in Gas Prices
Fact: New taxes on the oil and gas industry increase the cost of developing resources, exerting downward pressure on supply and, in turn, upward pressure on prices at the pump.
As stated previously, painting legitimate business deductions as “subsidies” that exist far outside the realm of the supply chain and the process of bringing oil and gas to market is erroneous and misleading. But what will the effect be on prices at the pump?
The assumption that levying new taxes on oil and gas production will somehow decrease prices at the pump is patently untrue.
Claim: President Obama has not banned oil production in the U.S.
Fact: The availability of domestic resources for leasing and development has plummeted during the Obama years.
Anyone who can drive to a gas station understands that not all production was banned as a result of President Obama’s moratorium (and subsequent “permitorium” on new oil and gas exploration. However, the policies did diminish our potential production, and by reducing supply, contributed to increased prices.
Beginning in 2008, elected officials began taking serious steps aimed at opening additional domestic resources to production – starting with the lifting of the executive moratorium on production in 2007 and 2008, and followed by the bipartisan decision in September 2008 to allow the Congressional moratorium on development to expire.
As of January 2009, the five-year leasing plan in place was poised to significantly increase domestic oil and gas production. But in early 2010, the President revised the plan, taking off the table significant resources that had previously been in the process of opening for development and leasing. In December of 2010, the Administration took it one step further, releasing an even more restrictive leasing plan that locked away the entire Atlantic, entire Pacific, and the Eastern Gulf of Mexico – effectively returning long-term domestic production prospects to where they stood prior to the lifting of both the executive and congressional moratoria in 2008. It’s difficult to call this anything but a “ban” on new development.
Claim: Oil and Gas Production has Increased Under President Obama’s Administration
Fact: Production increases witnessed in 2010 were rooted in previous policy and permitting.
Media Matters echoes President Obama’s claim in March that domestic production had increased in 2009 and 2010.
In reality, the statement is badly flawed. Oil production does not happen in measures of weeks or months or even years. The increase in production cited by the current White House is, in fact, primarily a result of permitting and policy decisions made by the Bush White House. Since companies spend years developing a single well from permit to production, to attribute the current uptick in production to Obama Administration policy is a mistake. Of course, oil prices (especially futures) often react much more quickly to decisions such as these – hence the reasoning behind committing quickly to new exploration, even though the gains will occur over a longer term.
More evidence of this fact? American domestic production is forecasted by the EIA to drop by 240,000 barrels per day (13 percent) in 2011, and an additional 200,000 barrels per day in 2012.
After this thorough examination of Media Matters’ claims and the tax situation facing American energy companies, it is indeed apparent the American people are being misled on this issue – not by the National Taxpayers Union, but from the current Administration and its allies. Should the effort succeed, not only will jobs be lost, energy diversity will be diminished, retirement portfolios of millions of Americans could be endangered and consumer gas prices be at risk. This may only be the beginning of a long list of tax increases sought by the Administration, all while refusing to enact any meaningful budget reform.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Best Line of the Day
Former New Hampshire Senator John Sununu has a very informative piece on energy tax breaks at Boston.com. I commend it to all of our recent energy commentors. Anyway, the Senator in discussing the hyperbolic rhetoric surrounding this issue has to have the best line of the day:
"If cars ran on crazy talk, we’d all drive for free."11 Comments | Post a Comment | Sign up for NTU Action Alerts
NTU Launches Million-Dollar Campaign to Fight New Energy Taxes
NTU has launched a $1.25 million television, radio, and online advertising campaign to oppose new energy taxes currently under consideration in Washington. A release about the campaign is here.
You can watch the tv ad below.
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More Social Security Payouts & Maple Syrup Bill Covered in Latest Taxpayer’s Tab
As the federal government narrowly escaped a shutdown and the President delivers a speech on his long-term fiscal plans, NTU Foundation has been scoring the bills introduced by your elected officials. Some bills would greatly increase the spending of tax dollars while others would scale back spending and reduce the budget. It is our intention to present both kinds of bills to inform taxpayers.
The most expensive bill scored in the past week would increase payments to Americans who turned 65 between 1979 and 1988. Because of earlier reforms to the Social Security entitlement program, this age group, called “Notch Babies,” apparently received up to 55 percent less in payments than those entering the system, before and after. The measure would allow seniors either to accept a lump payment of $5,000 over four years or to accept a modified benefit payment plan over ten years. Check out the history and the costs of the Notch Fairness Act in Issue 12 of the Taxpayer’s Tab.
Bills covered in the latest Taxpayer’s Tab includes:
Join NTUF on Twitter! We broadcast our latest work and highlight the spending agendas of the legislators representing you in Washington DC. Not a Twitterer? Sign up for the Tab so you get the most out of our research. Like what you see? Support NTUF and ride the wave of transparency.1 Comments | Post a Comment | Sign up for NTU Action Alerts
NTU Foundation’s weekly newsletter brings you a variety of bills this week with an environmental management plan bill for the Chesapeake Bay region, an act to establish a commission to study the nation’s justice system, a measure to create a domestic supply of medical isotopes, and a proposal to expand anti-hunger activities throughout the United States.
The bill to increase funding for community food initiatives and to expand some of the federal-to-state food stamp reimbursements is this week’s Most Expensive Bill of the Week. At $200 million in new federal spending for each of the next five years, HR 350 would direct tax dollars to nonprofit hunger groups within 20 designated geographic areas. The groups would present their plans and goals to receive operational grants and/or technical assistance grants. @NTUF will keep taxpayers informed about the different aspects of this bill, as well as the other three bills we detailed in Issue 7 of the Tab. Not much of a twitterer? No problem! Subscribing to the Tab is the best way to stay informed about all the exciting research coming out of NTU Foundation.
Newly scored bills highlighted in the latest Taxpayer’s Tab include:
Do you or anyone you know live in Congressmen Jose Serrano (NY-16) or Rob Wittman (VA-1), or Senators Jeff Bingaman (NM), Lisa Murkowski (AK), or Jim Webb’s (VA) states? Each of these legislators were mentioned in this week’s Tab. Check it out and keep a tab on your representatives!0 Comments | Post a Comment | Sign up for NTU Action Alerts
Fair Tax Act, Gun Control Bill Highlighted in Latest Tab
After our entitlement reform panel at CPAC and releasing our report on the President’s FY 2012 budget, NTUF has a new Taxpayer’s Tab with four newly scored bills. We’ve got a lot of research going on at the Foundation so be sure to keep up-to-date with @NTUF and be even more sure to support NTUF so we can get you the information you’ve come to expect!
One of the issues that have surfaced in the 112th Congress is tax reform. Many legislators are calling for tax simplification while others support a different stance: system replacement. The Fair Tax is one of those system alternatives that has gained more attention in the last few years. NTUF scored the Fair Tax Act at an $11 billion annualized savings. Check out the full Fair Tax description and how NTUF estimated the savings in the latest Tab edition.
Scored bills in Issue 6 of the Taxpayer’s Tab include:
Reflections on CPAC
Today is the third and final day of the 2011 Conservative Political Action Conference (CPAC), the largest annual gathering of conservatives and libertarians in the nation. After three days of staffing a well-visited booth, meeting with dedicated activists, and listening to dynamic speakers, I’m looking forward to some rest and relaxation, but also to what the future holds for the conservative movement.
This year’s CPAC had the highest number of attendees (11,000) in the history of the conference. CPAC speakers ranged from Rep. Paul Ryan of Wisconsin, the House Budget Committee Chair, to Governor Mitch Daniels of Indiana, a potential presidential candidate who gave, in my view, an outstanding keynote address, which you can read here. Also, CPAC 2011 featured a number of new participating organizations that focus on both activism and policy related to social, economic, and political issues at the federal, state, and local levels.
While attending CPAC, I had the opportunity to participate in a number of discussions about important tax and fiscal policy issues facing the United States. NTUF hosted a discussion about entitlement reform that featured experts such as Rep. Devin Nunes, Maya MacGuineas, Douglas Holtz-Eakin, Steven Moore, and Dan Mitchell. The bottom line of their presentation was that we need to start tackling the problem of runaway entitlement spending before it’s too late.
But budget reform should not be restricted to social programs. CPAC also featured a panel on how the nation can reduce defense spending to a more manageable level without jeopardizing readiness. As a former military aide to a fiscally conservative Member of Congress, I was pleased to hear all of the views presented and the many ideas for maintaining an affordable defense posture. The passion the attendees displayed at the panels, and in conversations with me at the NTU table, was striking. It bodes well for conservatives if these activists carry their views home and remain outspoken and active in the political process.
For the last several weeks, there has been a lot of talk in the media about differences in the conservative movement over certain policies and suggestions that these differences spell certain doom the conservative movement. After three days of observing conservatives of all stripes from across the country, I can unequivocally say that reports of destructive differences among conservatives are greatly exaggerated. In fact, I would argue that the conservative movement has never been stronger and ready to bring real solutions to the many serious problems facing the nation.3 Comments | Post a Comment | Sign up for NTU Action Alerts